diff --git a/gix-dir/src/walk/classify.rs b/gix-dir/src/walk/classify.rs
index 361dffde192..9593a2bb579 100644
--- a/gix-dir/src/walk/classify.rs
+++ b/gix-dir/src/walk/classify.rs
@@ -372,7 +372,11 @@ fn resolve_file_type_with_index(
             None
         };
         (
-            kind.filter(|_| entry.flags.contains(gix_index::entry::Flags::UPTODATE)),
+            kind.filter(|_| {
+                entry
+                    .flags
+                    .intersects(gix_index::entry::Flags::UPTODATE | gix_index::entry::Flags::ASSUME_VALID)
+            }),
             kind,
         )
     }
@@ -380,7 +384,11 @@ fn resolve_file_type_with_index(
     fn icase_directory_to_kinds(dir: Option<&gix_index::Entry>) -> (Option<entry::Kind>, Option<entry::Kind>) {
         let index_kind = dir.map(|_| entry::Kind::Directory);
         let uptodate_kind = dir
-            .filter(|entry| entry.flags.contains(gix_index::entry::Flags::UPTODATE))
+            .filter(|entry| {
+                entry
+                    .flags
+                    .intersects(gix_index::entry::Flags::UPTODATE | gix_index::entry::Flags::ASSUME_VALID)
+            })
             .map(|_| entry::Kind::Directory);
         (uptodate_kind, index_kind)
     }
diff --git a/gix/tests/fixtures/make_status_repos.sh b/gix/tests/fixtures/make_status_repos.sh
index d006b453de4..594dfa07c13 100755
--- a/gix/tests/fixtures/make_status_repos.sh
+++ b/gix/tests/fixtures/make_status_repos.sh
@@ -41,3 +41,19 @@ git init untracked-added
   echo content >added
   git add added
 )
+
+git init -q module
+(cd module
+  touch this
+  git add this
+  git commit -q -m c1
+)
+
+git init -q submodule-assume-unchanged-symlink
+(cd submodule-assume-unchanged-symlink
+  git submodule add ../module sub
+  git commit -q -m "add submodule"
+  git update-index --assume-unchanged sub
+  rm -Rf sub
+  ln -s ../module sub
+)
diff --git a/gix/tests/gix/status.rs b/gix/tests/gix/status.rs
index eb7f69355ee..8374fc30a55 100644
--- a/gix/tests/gix/status.rs
+++ b/gix/tests/gix/status.rs
@@ -265,6 +265,15 @@ mod into_iter {
         Ok(())
     }
 
+    #[test]
+    fn submodule_assume_unchanged_replaced_with_symlink_is_ignored() -> crate::Result {
+        let repo = repo("submodule-assume-unchanged-symlink")?;
+        let mut status = repo.status(gix::progress::Discard)?.into_iter(None)?;
+        let items: Vec<_> = status.by_ref().filter_map(Result::ok).collect();
+        assert!(items.is_empty(), "assume-unchanged submodule should not show up in status");
+        Ok(())
+    }
+
     #[test]
     fn error_during_tree_traversal_causes_failure() -> crate::Result {
         let repo = repo("untracked-only")?;